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 Economic and Social
Development of
Bangladesh
Miracle and Challenges

EDITED BY
Yasuyuki Sawada, Minhaj Mahmud and Naohiro Kitano
 Economic and Social Development of Bangladesh

“The book is an important contribution to our understanding of how Bangladesh

has transformed itself over the past decades from “a test case” to a development
surprise. The achievements as well as future challenges are rigorously analysed by
applying modern analytical tools–such as for measuring well-being and trust– and
by focusing on the agents of change, the microfinance institutions in particular.
The book will be equally useful to academics and practitioners interested in
Bangladesh’s development story and the lessons to be learnt.”
—Wahiduddin Mahmud, Former Professor of Economics, Dhaka University,
and Chairman of South Asia Network of Economic Research Institutes;
co-author of The Theory and Practice of Microcredit (Routledge).
 Yasuyuki Sawada • Minhaj Mahmud
Naohiro Kitano
Editors

Economic and Social

Development of
Bangladesh
Miracle and Challenges
Editors
Yasuyuki Sawada Minhaj Mahmud
Faculty of Economics Bangladesh Institute of Development
University of Tokyo Studies (BIDS)
Tokyo, Japan Dhaka, Bangladesh

Naohiro Kitano
Japan International Cooperation
Agency Research Institute
Tokyo, Japan

ISBN 978-3-319-63837-9    ISBN 978-3-319-63838-6 (eBook)

DOI 10.1007/978-3-319-63838-6

Library of Congress Control Number: 2017951918

© Japan International Cooperation Agency Research Institute 2018

This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights of
translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on
microfilms or in any other physical way, and transmission or information storage and retrieval,
electronic adaptation, computer software, or by similar or dissimilar methodology now
known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are
exempt from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information
in this book are believed to be true and accurate at the date of publication. Neither the pub-
lisher nor the authors or the editors give a warranty, express or implied, with respect to the
material contained herein or for any errors or omissions that may have been made. The
publisher remains neutral with regard to jurisdictional claims in published maps and institu-
tional affiliations.

Cover illustration: © Yasuyuki Sawada

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

The registered company is Springer International Publishing AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
 Foreword

The founding of Bangladesh in 1971 was met by a series of calamities:

poverty, vulnerable social and economic bases, poor infrastructure net-
works, and harsh natural conditions such as severe cyclones and consecu-
tive floods. Even after it first gained independence from the British Raj
and became East Pakistan in 1947, the Bangladeshis had to struggle
through the Liberation War in order to secure real independence with
political and linguistic sovereignty. Despite its problematic beginning as a
nation, in recent years Bangladesh has undoubtedly been on an ascending
trajectory of dynamic development. The country has seen great achieve-
ments in industrialization—promoting gender equality in education,
improving the overall employment situation, providing financial assistance
to the most vulnerable, and through structural transformation—has
reduced some of the risks faced by the population, and thus improved
their well-being.
Since 1973, just two years after Bangladesh’s independence, the Japan
International Cooperation Agency (JICA) has been a key partner. Working
in cooperation with the people and the government of Bangladesh in
almost all sectors throughout the country, JICA has provided technical
cooperation, the Official Development Assistance loan, aid grants, and
volunteers. As president of JICA, I am pleased that this volume is able to
contribute a number of policies and strategies for bringing about sustain-
able socioeconomic development in the country. The volume provides
insights for researchers, practitioners, and the general public through the
dissemination of the findings of the research project Empirical Study on
Risk and Poverty in Bangladesh.

v
vi FOREWORD

This book aims to discuss Bangladesh’s economic and social develop-

ment in recent years, which may be described as a “miracle.” The book
explores the factors which drove this “miracle” in the face of various natu-
ral and socioeconomic hardships, and potential challenges that the coun-
try still needs to address. Focusing on a variety of topics and analyses based
on solid quantitative evidence, this book advances effective policy recom-
mendations that can be replicated in other developing countries.
The tragic incident that took place in 2016 is still fresh in our minds.
On July 1, 2016, seven Japanese development specialists were killed and
one injured in a terrorist attack in Dhaka; all eight were engaged in a
development project at the time. While we were compelled to suppress
our anger toward the criminals who committed this callous act of terror-
ism, this has not hindered our development work in Bangladesh. I sin-
cerely pray that those who lost their lives rest in peace, and I offer my
condolences to their loved ones.

Japan International Cooperation Agency

President
Shinichi Kitaoka
 Acknowledgments

This book greatly benefited from using the information revealed in the
“Livelihood System of Rural Households Panel Data,” a survey of a
nationally representative sample of rural households in Bangladesh. These
data were collected by the late Dr. Mahabub Hossain, former executive
director and adviser, BRAC. We gratefully acknowledge his contribution
and utmost support for our work by allowing the use of the data set for
the analyses in Chaps. 6 and 10. Chapter 10 also benefited from using the
second-generation panel data of the first-generation village level studies
(VLS) conducted by the International Crop Research Institute for Semi-
Arid Tropics (ICRISAT) in the Andhra Pradesh and Maharashtra states
of India. We thankfully acknowledge the contribution of ICRISAT.
Chapter 14 benefited from using the data collected by the BRAC Institute
of Governance and Development (BIGD) as part of its annual flagship
report. We sincerely thank Dr. Sultan Hafeez Rahman for his support in
this regard.
Chapter 12 benefited from data collected using funding from the
Swedish International Development Agency (Sida), which is thankfully
acknowledged. Chapters 4 and 9 used the data that the authors collected
with the financial support of the World Bank and benefited from the tech-
nical support provided by the Bangladesh Institute of Development
Studies (BIDS) and the Institute of Microfinance. Chapter 3 benefited
from the data obtained through the Palli Karma-Sahayak Foundation
(PKSF), Credit and Development Forum (CDF), and the Bangladesh
Bureau of Statistics (BBS). We duly acknowledge the contributions of
these institutions. We also truly appreciate that the micro-data collection

vii
viii ACKNOWLEDGMENTS

conducted by JICA-RI in Bangladesh under this research project contrib-

uted to interesting analyses in various chapters of the book.
We express our gratitude to Ambassador Akio Hosono, Senior Research
Adviser of JICA-RI, for his support and encouragement toward our
research from the very beginning of this book project. The book inception
workshop was held in Tokyo in July 2014, and we received very insightful
comments from all participants, particularly Mr. Hiroshi Kato, Senior Vice
President of JICA, Professor Keijiro Otsuka, and Professor Tetsushi
Sonobe. The outline of the book, including the initial drafts of some chap-
ters, was presented in an organized session at the Asian Society of
Agricultural Economists (ASAE) Conference in October 2014 in Dhaka,
and we thankfully acknowledge the helpful comments obtained from the
participants, particularly from Mr. Mikio Hataeda, the then chief repre-
sentative of JICA Bangladesh Office, Professor Abdul Bayes, and the late
Dr. Mahabub Hossain. We thankfully acknowledge insightful comments
from workshop participants, particularly Professor Mushfiq Mobarak of
Yale University, and JICA-RI researchers, Dr. Daiji Narita, Dr. Mai Seki,
and Mr. Kengo Igei, as well as comments and suggestions from Dr.
Binayak Sen of BIDS and Dr. Farzana Munshi of BRAC University.
Finally, we duly acknowledge the excellent editorial support from Mr.
Yasuhiko Sato, the editor of JICA-RI, the continuous advice and encour-
agement by Mr. Ken Odajima, who leads the research project at JICA-RI,
and the coordination support from then/current JICA-RI Research
Fellows and Research Officers, especially Dr. Suguru Miyazaki, Mr. Naoki
Nishimura, Mr. Eiji Yamada, Mr. Akira Hara, and Ms. Hiroko Matsuo, for
this book project.

Yasuyuki Sawada
Minhaj Mahmud
Naohiro Kitano
 Contents

Part I Economic Transformation   1

1 Development Transformation in Bangladesh: An Overview   3

Minhaj Mahmud, Keijiro Otsuka, Yasuyuki Sawada,
and Eiji Yamada

2 The Miraculous Development of the Garment

and Pharmaceutical Industries in Bangladesh  27
Tetsushi Sonobe, Khondoker Abdul Mottaleb, and
Md. Nurul Amin

3 Welfare Implications of Subsidies in the Microfinance

Industry in Bangladesh  53
Yasuyuki Sawada, Yuhei Miyauchi, and Junichi Yamasaki

4 Bangladesh’s Structural Transformation: The Role

of Infrastructure  71
Shahidur R. Khandker and Hussain A. Samad

5 International Migration and Remittances for Economic

Development in Bangladesh: An Overview  93
Akira Murata

ix
x Contents

Part II Social Transformation 115

6 Non-farm Sector Growth and Female Empowerment

in Bangladesh 117
Minhaj Mahmud, Keijiro Otsuka, Yasuyuki Sawada,
Mari Tanaka, and Tomomi Tanaka

7 Primary, Secondary, and Tertiary Education in

Bangladesh: Achievements and Challenges 135
Hisaki Kono, Yasuyuki Sawada, and Abu S. Shonchoy

8 NGO Employments and Job Preferences of Youth:

Evidence from Bangladesh 151
Akira Murata and Naoki Nishimura

Part III Welfare Improvements 175

9 Bangladesh’s Achievement in Poverty Reduction:

The Role of Microfinance Revisited 177
Shahidur R. Khandker and Hussain A. Samad

10 Is Multiple Borrowing a Bad Sign? Evidence from

Bangladesh and India 199
Yasuyuki Sawada, Mari Tanaka, and Minhaj Mahmud

11 Urbanization and Subjective Well-Being in Bangladesh 215

Minhaj Mahmud and Yasuyuki Sawada

12 Happiness in Life Domains: Evidence from

Rural Bangladesh 233
Minhaj Mahmud and Yasuyuki Sawada
 Contents 
   xi

Part IV Risk and Challenges 251

13 Challenges in Reducing the Number of Disaster

Victims in Bangladesh 253
Masahiro Shoji and Akira Murata

14 Governance Challenges: Institutional Quality and

Trust in Bangladesh 273
Minhaj Mahmud and Yasuyuki Sawada

Author Index 291

Subject Index 299
 List of Abbreviations

APSC Annual Primary School Census

ASA Association for Social Advancement
ASPR Annual Sector Performance Review
ATE Average Treatment effects
BDT Bangladeshi Taka
BGMEA Bangladesh Garment Manufacturers and Exporters Association
BIDS Bangladesh Institute of Development Studies
BIGD BRAC Institute of Governance and Development
BKMEA Bangladesh Knitwear Manufacturers and Exporters Association
BMET Bureau of Manpower, Employment and Training
BNFE Bureau of Non-Formal Education
BOD Biochemical Oxygen Demand
BOESL Bangladesh Overseas Employment and Services Limited
BPS BRAC Primary School
BRDB Bangladesh Rural Development Board
CDF Credit and Development Forum
CEGIS Center for Environmental and Geographic Information Services
CODEC Community Development Centre
CPP Cyclone Preparedness Programme
CSP Child Survival Program
DCE Discrete Choice Experiment
DGDA Directorate General of Drug Administration
DPE Department of Primary Education
DSHE Directorate of Secondary and Higher Education
DTE Directorate of Technical Education
EM-DAT Emergency Events Database
ERG Economic Research Group

xiii
xiv List of Abbreviations

FDI Foreign Direct Investment

FFE Food for Education
FIVDB Friends in Village Development Bangladesh
FLFP Female Labor Force Participation
FSSAP Female Secondary School Assistance Project
FSSSP Female Secondary School Stipend Program
GCC Gulf Cooperation Council
GCSE General Certificate of Secondary Education
GDP Gross Domestic Product
GER Gross Enrollment Rate
GIS Geographic Information Systems
GMP Good Manufacturing Practices
GOB Government of Bangladesh
GPI Gender Parity Index
GPS Government Primary Schools
GUK Gram Unnayan Karma
HC Headcount Ratio
HIES Household Income & Expenditure Survey
HSC Higher Secondary Certificate
ICRISAT International Crop Research Institute for Semi-Arid Tropics
ICT Information and Communication Technology
IFPRI International Food Policy Research Institute
IIA Independence of Irrelevant Alternatives
InM Institute of Microfinance
IRRI International Rice Research Institute
IV Instrumental Variable
JICA Japan International Cooperation Agency
JICA-RI JICA Research Institute
JOCV Japan Overseas Cooperation Volunteers
JSC Junior School Certificate
JSPS Japan Society for the Promotion of Science
KIIs Key Informant Interviews
LDV Lagged Dependent Variable
LGED Local Government Engineering Department
MDGs Millennium Development Goals
MFI Microfinance Institution
MOC Ministry of Commerce
MOE Ministry of Education
MoPME Ministry of Primary and Mass Education
MoSW Ministry of Social Welfare
 List of Abbreviations 
   xv

MRA Microfinance Regulatory Authority

NDP National Drug Policy
NER Net Enrollment Ratio
NGOs Non-Governmental Organizations
NIEs Newly Industrialized Countries
ODA Official Development Assistance
OLS Ordinary Least Squares
OTEP Oral Therapy Extension Program
PKB Prabashi Kalyan Bank
PKSF Palli Karma-Sahayak Foundation
POs Partner Organizations
PSU Primary Sampling Units
RCTs Randomized Control Trials
RED Research and Evaluation Division
RMG Ready-made Garment
RNGPS Registered Non-Governmental Primary Schools
RRF Rural Reconstruction Foundation
RWDO Reliant Women Development Organization
SAT Semi-arid Tropics
SBT Space Based Technology
SDGs Sustainable Development Goals
SIDA Swedish International Development Agency
SME Small and Medium Enterprise
SSA Sub-Saharan Africa
SSC Secondary School Certificate
SUR Seemingly Unrelated Regression
SWB Subjective Well-being
SWC Storm Warning Center
TFR Total Fertility Rate
TIB Transparency International Bangladesh
TVET Technical Vocational Education and Training
UAE United Arab Emirates
UGC University Grants Commission
UNICEF United Nations Children’s Fund
VARD Voluntary Association for Rural Development
VGF Vulnerable Group Feeding
WGI Worldwide Governance Indicator
WVS World Value Surveys
 List of Figures

Fig. 0.1 Structural transformation in Bangladesh xxv

Fig. 1.1 Real per capita GDP in selected countries (PPP) 6
Fig. 3.1 Welfare impact of subsidies 67
Fig. 4.1 An economic framework for development 77
Fig. 5.1 Destination countries of Bangladeshi migrant workers,
2015 (%) 97
Fig. 6.1 Analytical framework of female empowerment in Bangladesh 119
Fig. 6.2 Models of non-farm sector development and female
empowerment124
Fig. 10.1 Purpose of borrowing of single borrowers (Bangladesh)
and purpose of borrowing of multiple borrowers (Bangladesh) 209
Fig. 12.1 The domain-specific happiness and income relationship 245
Fig. 13.1 Shelters. (a) Multipurpose emergency shelter in Satkhira,
(b) new design of cyclone shelter, (c) excavation on the road 260
Fig. 13.2 Information sources of cyclone warning during Aila 265

xvii
 List of Tables

Table 1.1 The change in the poverty head count ratio (HC) with a
USD 1.25 a day poverty line in the Sub-Saharan
African region and in South Asian countries 8
Table 2.1 The relationship between human capital and business
performance in the garment sector 42
Table 2.2 Estimated models explaining drug manufacturer behavior
and performance 45
Table 3.1 (a) The effect of another entry on the entry of small and
medium MFIs. (b) The effect of another entry on the
entry of large MFIs 59
Table 3.2 (a) The effect of another entry on the borrowers of small
and medium MFIs. (b) The effect of another entry on
the borrowers of large MFIs 62
Table 3.3 The determinants of the number of employees 64
Table 4.1 Changes in infrastructure services indicators (1990 and 2010) 74
Table 4.2 Panel quintile estimates of the impacts of policy variables on
household outcomes 86
Table 6.1 Descriptive statistics: long-run changes in key household
and female variables 121
Table 6.2 Female school attendance regression 126
Table 6.3 Multinomial logit regression with household fixed
effects results 128
Table 6.4 OLS and village fixed effects regression results 129
Table 6.5 OLS and household fixed effects regression results 130
Table 7.1 Number of applicants and seats in public and national
universities in 2014 144

xix
xx List of Tables

Table 8.1 Determinants of job preference and job satisfaction among

Bangladeshi NGO staff aged 29 years or less in 2014 161
Table 9.1 Impacts of current and past borrowing from microcredit
sources: household fixed effects estimates with controls for
the lagged dependent variable and initial conditions
(NHH = 1509)188
Table 9.2 The impact of continuity in borrowing from microcredit
sources: household fixed effects estimates with controls for
the lagged dependent variable and initial conditions
(NHH = 1509)192
Table 11.1 Ordered probit estimates (marginal effects) of subjective
well-being227
Table 12.1 Analysis of happiness 239
Table 13.1 Cyclone Aila—damage, socio-economic status of the
affected areas, and evacuation patterns 263
Table 14.1 Trust (confidence) in institutions 281
Table 14.2 Determinants of institutional trust 284
 Introduction

The primary purpose of this book is to discuss Bangladesh’s recent eco-

nomic and social development, which may be called a Miracle, as the
country has achieved remarkable development progress under several
unfavorable conditions, including weak governance and political instability,
inequalities within the country, the downsides of rapid urbanization, and
exposure to several natural disasters.1 This book analyzes how the country
achieved such a miraculous economic and social development, and high-
lights some potential challenges that it will need to address to sustain its
economic progress. Through the analysis presented in each chapter, this
book also aims to identify those effective policy interventions that may be
replicable in other developing countries.
In 1947 when British control of India came to an end, Bengal was parti-
tioned based on religion rather than language or ethnic origin. The eastern
and western parts of Bengal became part of Pakistan (East Pakistan) and
India, respectively. It took another 24 years for modern Bangladesh to
emerge as an independent nation in 1971, after achieving independence
from Pakistan.2 While there was no significant difference in per capita
income between East and West Pakistan during the partition of India, post-

1
However, Bangladesh’s experience also raises a relevant question if there are areas where
governance does not appear to be a particularly major problem for growth (Mahmud et al.
2008).
2
Unlike Pakistan, Bangladesh drew inspiration from Bengali nationalism, and its constitu-
tion made an unqualified declaration that the country would be a secular state having no
institutional relation with religion. However, the constitution was later revised to declare
Islam as the State religion in 1988.

xxi
xxii Introduction

independence differences in economic growth between the two parts of

Pakistan were discernible, and increasingly widened in favor of West
Pakistan. For example, during the period 1959–1960 and 1969–1970, East
Pakistan’s per capita income increased by 1.5 percent per annum, compared
to the 3.6 percent increase experienced in West Pakistan, and this resulted in
a 61 percent higher per capita income in West Pakistan by 1969–1970 (Bose
1983). This disparity was also observed in many other social and economic
development indicators, ultimately strengthening secessionist arguments.3
As a country of roughly 160 million people, Bangladesh has obtained a
sustained GDP growth rate of 6 percent or higher for a decade, and has
made commendable progress toward poverty reduction through success-
ful policy intervention. First and foremost, the country, since its inception,
has gradually improved the lives of its people: starting with a per capita
income of less than 100 dollars and a poverty rate at over 70 percent in
1974 (Sen 2000), the country’s per capita income grew by 1.9 percent
per annum during 1975–2002, and at a rate of 3 percent from 1990 to
2002 (UNDP 2004). However, in the 1970s, the country was heavily
dependent on foreign aid due to a lack of domestic resources needed for
capital formation; the saving and investment rates were stuck below 5 and
15 percent of GDP, respectively (Taslim 2008).
In the late 1970s, remittances from migrant workers contributed sig-
nificantly to foreign exchange reserves, which gradually reduced depen-
dence on foreign aid and strengthened national savings (Taslim 2008).
Taslim and Weliwita (2000) suggest that low saving and investment rates
in the initial years can be attributed to a lack of entrepreneurship, but the
pool of entrepreneurs increased with the rapid growth of ready-made gar-
ments in the 1990s, and as a result investment and saving increased at
much higher rate during 1990–2000. Ahmed (2005) also suggests that
the growth performance in this period resulted from an expansion of the
investment rate as well as greater openness to international trade. In the
1990s the economy grew steadily at a rate of 5 percent per annum, and
income/consumption poverty declined substantially, and this was matched
by the country’s impressive performance on basic human development
indicators at a relatively low income.4,5

3
Bose (1983) provides a succinct and comparable account of East Pakistan’s economy
compared with that of West Pakistan between 1949–50 and 1970.
4
See Mahajan (2005) for an analysis of Bangladesh’s growth experience in the 1990s.
5
For a review of Bangladesh’s incidence of poverty during 1990s, see Muragi and Zaidi
(2005).
 Introduction 
   xxiii

During the 1990s the country’s population growth was reduced to 1.5
percent, down from the 2.4 percent observed in the 1970s. Most notably,
Bangladesh made substantial progress in human development during this
period: life expectancy at birth increased from 42.2 years in 1970 to 61.1
years in 2002, and the infant mortality rate dropped from 145 per 1000
live births in 1970 to 51 per 1000 live births in 2002 (UNDP 2004).
Over the last decade, Bangladesh has achieved a sustainable economic
growth of more than 5 percent per annum. According to the latest World
Bank report, over 15 million Bangladeshis have moved out of poverty
since 1992 (World Bank 2016).
Accordingly, the country is now on track with respect to not only the
poverty-related sustainable development goals (SDGs) but also the
“first-generation” development goals known as the millennium devel-
opment goals (MDGs). The latest available household expenditure sur-
vey (HIES) data reveal that the incidence of poverty has declined on
average by 1.74 percent during the period, exceeding the MDG target
of 1.20 percent. Indeed, the MDG target was successfully achieved; the
country reduced the number of people living below the poverty line
(24.8 percent) as well as the poverty gap ratio (6.5), according to the
latest estimate by the General Economics Division of the Planning
Commission of Bangladesh. Concurrently, there were also remarkable
achievements in terms of increased primary school enrollments, gender
equalization, decreased infant mortality rates and maternal mortality
ratios, improved immunization coverage, and a lower incidence of com-
municable diseases.
As discussed in detail in Chap. 1, Bangladesh’s development transfor-
mation was fueled by three country-specific mechanisms: the penetration
of microfinance institutions (MFIs) and other non-government organi-
zations (NGOs) into rural communities that led to relaxed credit and
other binding constraints on rural poor households; the spectacular
development of the ready-made garment industry resulting in the rapid
transformation of the economy from an agriculture-based to an industry-
oriented one; and the significant investments in infrastructure, particu-
larly in roads and bridges, which has helped to connect the formerly
fragmented spatial economy.
Although we call the country’s development miraculous, there are a
number of old and new challenges for further success in the future: the
conflict between the political parties in and out of government often
intensifies strikes and political instabilities; the country has been
xxiv Introduction

plagued by a variety of disasters such as floods and cyclones, man-made

disasters such as the collapse of the ready-made garment (RMG) fac-
tory building in April 2013, and the continued economic crises in
developed countries that significantly affect the exports of Bangladesh.
In this book, we aim to identify the critical factors behind Bangladesh’s
miraculous economic and social development as well as its potential
vulnerabilities.
This book is largely based upon the results of a three-year research
project “Empirical Study on the Risk and Poverty in Bangladesh,” con-
ducted by the JICA Research Institute (JICA-RI). In 1973, just two
years after the independence of Bangladesh, JICA started development
cooperation with Bangladesh. Since then, JICA and Bangladesh have
worked together in a wide range of areas of development, using Japanese
ODA tools such as technical cooperation, loans, grants, and Japan
Overseas Cooperation Volunteers (JOCV), with an emphasis on upgrad-
ing the transport infrastructure that connect the regions in the country,
poverty reduction through agriculture and rural development, ensuring
the supply of electricity and energy for industrial development and
improved living standards, and on human development through health-
care and education. For example, to improve the connectivity between
regions separated by large rivers, JICA has supported the Bangladesh
government in the construction of bridges, such as the Jamuna
Multipurpose Bridge co-financed by the Asian Development Bank and
the World Bank. In addition, JICA and other development partners pro-
vided financial and technical support for rural infrastructure, such as
rural road and water facilities; especially through the Local Government
Engineering Department (LGED), famous for its exceptional efficiency
(Fujita 2011), aiming at alleviating rural poverty through agricultural
production growth. Also, as discussed later in this book (see Chap. 13),
more than 100 local shelters to mitigate the damage from cyclones and
floods have been built with Japanese assistance along the coastal areas of
Bangladesh. And, Japanese grant aid also supported the installation of
meteorological prediction systems for efficient early warning of weather
events.
Regarding the governance issues that spread through every level of
the government in Bangladesh, one leading example of positive coop-
eration at the local level was a project aiming at establishing a link
between people and public servants in unions, the lowest administrative
 Introduction 
   xxv

body in Bangladesh. JICA supported the facilitation of this link-model

approach until the model was incorporated into the formal regulations
of Bangladesh. JICA has also put weight on the important role of
microfinance institutions (MFIs) and NGOs, and has supported their
operation through several cooperation projects. It was in the mid-
1990s that JICA first extended ODA loans to MFIs, an action that
financed the Grameen Bank’s early expansion. Another ODA loan
project was launched in 2014 to facilitate credit to agricultural farmers
from MFIs.

The Miracle and Challenges of Bangladesh

Observing the recent rigorous economic growth and social improvements
in the country, JICA-RI became strongly motivated to empirically review
the mechanisms behind these achievements as well as the remaining chal-
lenges, which are undoubtedly associated with JICA’s cooperation experi-
ence in Bangladesh. The research project was then designed to describe
the recent improvements in a unique way, to facilitate a more comprehen-
sive understanding of these mechanisms for future policy discussion. The
originality of this research project can be summarized by the conceptual
framework for the country’s overall development process described in
Fig. 0.1.

Infrastructure

Development of nonfarm sectors

• Urban construc on
Nonfarm Nonfarm
• RMG, Pharmaceu cal, and etc. employment income
• NGOs complemen ng government

Farm income Overall welfare improvement

Green
revolu on Human capital
investments

Beer credit
MFIs
accessibility

Exogenous changes Endogenous changes

Fig. 0.1 Structural transformation in Bangladesh. Source: Authors

xxvi Introduction

Although there are studies on Bangladesh that have focused on micro-

finance, NGOs, the development of the ready-made garment sector, the
empowerment of women, and so on, these tended to discuss each issue
separately, and few have explored how the development in each sector
relates to enable the country’s sustained development overall. Thus, what
we aim to provide in this book is a comprehensive picture of the develop-
ment of Bangladesh that is often termed a Miracle. This book is primarily
for academics and practitioners who have special interest in Bangladesh’s
development. The book will be of immense benefit to academics and post-
graduate students interested in development economics or development
issues in general, such as poverty, education, and microfinance. Each chap-
ter provides solid and high-quality evidence on each topic but also con-
nects the evidence with modern applied microeconomics. The underlying
conceptual issues and methodologies adopted in this book may go beyond
the scope of the advanced undergraduate level. To better understand the
materials covered in the book, students or less advanced readers may need
to supplement the book with additional textbooks on development eco-
nomics such as Banerjee and Duflo (2011), and on econometrics such as
Woodridge (2011) and Angrist and Pischke (2014). However, prior
knowledge of the recent topics in economic development is not required
to follow the materials presented in this book.
This book argues that Bangladesh’s remarkable success has been facili-
tated by several structural transformations: the structural change from a
farm-based to non-farm-based economy, and the transformation of
industries from domestic informal sectors to formal export-oriented man-
ufacturing sectors. Particularly, the book focuses on “industrialization
success,” “microfinance,” and “female empowerment,” as key drivers for
structural transformation and pro-poor development. The development
of infrastructure fueled the emergence of non-farm sectors in urban con-
struction and the RMG industry. The development of the RMG sector is
based on the utilization of women as a rich but underutilized workforce,
which in turn, accelerated their empowerment and their inclusion into
society’s development processes. The penetration of MFIs into villages
relaxed the binding resource constraints in rural Bangladesh. The domi-
nance of women borrowers from microfinance programs also played a
role in strengthening the status of women and materializing equitable
pro-poor growth.
Another novel feature of this book is that it focuses not only on these
successes but also on the challenges in building “resilience” against
 Introduction 
   xxvii

unsustainable urbanization, economic and political risks, and disasters.

The rapid structural transformation of the economy inevitably generated
inequalities in employment, income, and education opportunities. Also,
because of this successful transformation, rapid urbanization enhanced
people’s exposure to various risks such as traffic accidents, air and water
pollutions, infectious diseases, and natural and technological disasters.
The lack of good governance and political instability also act as hindrances
to sustained growth.
One may notice that the analytical framework of this book appears to
some extent to be silent about the role of public institutions in the process
of structural transformation, as neither the Bangladeshi government nor
bilateral and multilateral development partners such as JICA are treated as
key driving forces of recent growth. However, this does not mean that this
book disregards the efforts of these public institutions to promote the
development of the country. While focusing on the key driving forces such
as private firms, NGOs, MFIs, and those women who have started to par-
ticipate in the economic spheres of the country, this book implicitly
acknowledges the catalytic role of public institutions in facilitating the
activities of these field players.

Overview of the Book

This book discusses Bangladesh’s miracle and challenges in its economic
and social development. While the country has achieved remarkable devel-
opment progress, it continues to face obstacles including weak governance
and political instabilities, inequalities within the country, pitfalls of rapid
urbanization, and exposure to a variety of natural disasters. In addition to
this introduction, the book is composed of 14 self-contained chapters that
are based on original research, and organized into four sections: (I) eco-
nomic transformation; (II) social transformation; (III) welfare improve-
ments; and finally, (IV) the risks and challenges for further development.

I. Economic Transformation

Chapter 1. Development Transformation in Bangladesh:

An Overview
Chapter 1 provides a comparable overview of Bangladesh’s development
experience vis-à-vis countries in the region and countries with similar
xxviii Introduction

initial conditions regarding development. The authors attribute

Bangladesh’s successful development transformation, which occurred in
an accelerated manner, to mainly three country-specific mechanisms: the
penetration of MFIs and NGOs into rural communities that led to relaxed
credit constraints on rural poor households; the spectacular development
of the ready-made garment industry, which resulted in the rapid transfor-
mation of the economy from an agriculture-based to an industry-oriented
one; and the significant investments in infrastructure, particularly bridges,
which have helped to connect the formerly fragmented economy. However,
some challenges have been listed for Bangladesh: climate change and nat-
ural disasters like cyclones and floods; the downturn in export markets in
developed countries, insufficient planning and investment in infrastruc-
ture, and man-made disasters such as political strikes and instabilities. This
chapter highlights the challenges that need to be addressed in sustaining
its economic and social progress.

Chapter 2. The Miraculous Development of the Garment

and Pharmaceutical Industries in Bangladesh
In Chap. 2, the authors provide an analytical account of the phenomenal
growth of the garment and pharmaceutical sectors in Bangladesh that led
the way to economic transformation and miraculous economic growth.
Formulating and testing several hypotheses, the authors attempt to explain
that the rapid and sustained growth of these industries is less “mysterious”
than one would think, and argue that technology transfer through learn-
ing by doing benefited industrial development, paving the way for the
economic transformation of the country.
While the garment and pharmaceutical industries ostensibly differ in
many respects, the authors have shown that there is much more com-
monality than one would think, and that the two industries shared essen-
tially the same growth mechanism. Both industries began their rapid
development with massive transfers of technology in a broad sense, even
though they differed in the motivations for such transfers. The massive
transfers in technology made these previously unprofitable industries
highly profitable, which motivated affluent business persons and financial
institutions to invest in them, and highly educated youth to be attracted
to the idea of being their future leaders. These highly educated managers
in turn constructed systems in their firms to constantly upgrade manage-
ment practices, marketing, and production technology by learning from
 Introduction 
   xxix

abroad, which has kept their firms and industries competitive in world
markets. This chapter tries to demystify the rapid growth of the two
industries, arguing that economic theory can offer a consistent explana-
tion for this situation.

Chapter 3. Welfare Implications of Subsidies in the Microfinance

Industry in Bangladesh
The number of microcredit programs in poor communities has increased
dramatically, and thus competition between MFIs has intensified substan-
tially. While a set of rigorous demand-side impact evaluations of microfi-
nance programs has emerged, to the best of our knowledge there have
been few studies which rigorously and empirically examine the causes or
consequences of competition among MFIs.
In Chap. 3, the authors bridge this gap in the microfinance literature by
empirically assessing the welfare implications of intensified competition
among MFIs arising from their rapid growth in Bangladesh. The authors
estimate the impact of subsidies on microfinance coverage in Bangladesh,
and show that demand is substitutable between MFIs. Based on these
estimates the authors have deduced that only around 30 percent of all
upazilas (sub-districts) in the country are affected by subsidies, and even
when the return to the borrower is 35 percent, only 10 percent of all
upazilas experience an improvement in welfare. These empirical results
suggest that while subsidies did facilitate the rapid growth of the MFI sec-
tor in Bangladesh, microfinance programs may need to generate a
significantly—or even unreasonably high—benefit to justify subsidies. It
may be mentioned, however, that since subsidies were implemented, MFI
programs have involved a variety of benefits other than the ones consid-
ered in the analysis presented here. This suggests that we need to be care-
ful in evaluating the role of subsidies based on these empirical results.

Chapter 4. Bangladesh’s Structural Transformation:

The Role of Infrastructure
While available studies based on cross-country evidence at the macro
level suggest that there is a positive correlation between infrastructure
growth and the economic development of a country, this research is first
of this kind particularly in the context of Bangladesh that shows the
impact of infrastructure on household-level welfare. In this chapter, the
xxx Introduction

authors review the role of infrastructure in structural transformation, and

its consequences for the welfare of rural households in Bangladesh. The
authors, using both community- and household-level infrastructure
interventions data in rural Bangladesh, show that infrastructure develop-
ment enhances household welfare, and in particular, income and expen-
diture, thereby reducing the incidence of poverty. The authors argue that
public investments in roads, electricity, and financial institutions trigger
structural transformation, which increases and diversifies rural incomes,
raises consumption expenditures, reduces poverty, and increases educa-
tional achievements.
Based on empirical analysis, the authors conclude that household
income goes up by 10 percent and consumption expenditure by 4.7 per-
cent with the addition of one MFI branch in a village. They also show
that grid connectivity and road investments increase incomes and expen-
ditures, and hence lower poverty. The authors argue that welfare growth
by itself does not necessarily lead to structural transformation, but the
key to structural transformation is a sustained change in demand, pro-
duction, and employment, in particular from low productivity activities
such as agriculture to high return activities such as non-farm enterprises
and services. Their analysis also shows that infrastructural investments
raise non-farm income more than farm income. The authors conclude
that all these developments point to a structural transformation at play in
rural Bangladesh.

Chapter 5. International Migration and Remittances

for Economic Development in Bangladesh: An Overview
Labor migration, particularly international labor migration, plays a key
role in the economic development of Bangladesh. In Chap. 5, the authors
summarize the patterns and key issues related to the cross-border migra-
tion of Bangladeshi people, and also discuss the trends in international
remittance flows and their role in the economic progress of Bangladesh.
The authors explain that at the macro level, a steady flow of remittances
into the country supports its foreign exchange reserves as well as eases the
strong pressure on job creation within the country. At the micro or house-
hold level, migration can contribute to better income opportunities and
poverty reduction, mainly through an increase in consumption of com-
modities such as food and clothing. Since remittances from migrant work-
ers have positive impacts on poverty reduction and development in
 Introduction 
   xxxi

Bangladesh, these positive impacts could become longer-term and broader

if migrants and their households could use remittances for more produc-
tive purposes such as education, housing, or other purposes that enhance
households’ longer-term income prospects, and also generate positive
spillovers to other households.
The authors also discuss several policies and implications: First, the
government needs to anticipate long- and medium-term demand, and to
train and educate potential young talent to meet the demand of diversified
fields in existing and potential migrant destinations. Second, the govern-
ment and civil societies need to establish standards to ensure protection of
the increasing numbers of female migrants, particularly for those working
as domestic workers. Third, the government, with support from donors,
should strengthen financial literacy programs and training on household
financial management and coping strategies for migrants and their fami-
lies. This will also facilitate the inclusion of rural households in Bangladesh
in the financial system. The authors also suggest that provision of innova-
tive saving products, such as a diaspora bond and tax exemption facility for
expatriate workers, would further boost remittance flows and thus con-
tribute to long-term economic development of the country.

II. Social Transformation

Chapter 6. Non-farm Sector Growth and Female Empowerment
in Bangladesh
In Chap. 6, the authors examine the role of non-farm sector growth in
facilitating several female empowerment indicators such as female school-
ing, labor force participation, and delayed marriages. This chapter’s find-
ings are summarized as follows. First, the authors investigated the evolution
of female educational attainment and labor force participation in the non-
farm sector. Bangladesh has achieved the rapid industrialization of export-
oriented non-farm industries such as the garment and pharmaceutical
industries, which have provided opportunities particularly for relatively
educated women to work outside their homes. From the analysis of house-
hold panel data collected between 1988 and 2008, the authors show that
educational attainment matters to the non-farm labor market participation
of women, and that non-farm sector growth in a village facilitates their
educational attainment. However, the authors also argue that simultane-
ous improvement in female school enrollment as well as delayed marriage
xxxii Introduction

may alternatively occur as a result of unobserved changes in household-

level progressive norms. This is an area for future research in Bangladesh,
as is also suggested by the authors.

Chapter 7. Primary, Secondary, and Tertiary Education

in Bangladesh: Achievements and Challenges
The authors provide a succinct overview of the achievements and chal-
lenges of the education sector in Bangladesh, focusing on all elementary,
secondary, and tertiary education levels. As the authors argue, notwith-
standing the notable achievements that have been made in overall educa-
tional attainment as well as in narrowing the gender gap, Bangladesh has
a long way to go to improve the overall quality of education and student
performance levels that will be indispensable for gaining international
competitiveness and achieving sustainable development through the
creation of quality human capital. As they point out, the current short-
comings of this sector arise from a variety of issues, such as school drop-
outs as a result of seasonality and academic calendar mismatches with that
of farming, the low quality of teaching and learning, inadequate technical
and vocational training, and limited tertiary education facilities. They also
point to the noticeable female dropout rate—especially at the upper sec-
ondary level, and suggest that such gender disparity in dropout rates can
also be found in tertiary education. Finally, the authors suggest that to
improve access to education for rural and poor households at the tertiary
level, it is critical to increase the capacity of the universities.

Chapter 8. NGO Employments and Job Preferences of Youth:

Evidence from Bangladesh
In this chapter, the authors highlight the proliferation of non-governmental
organizations (NGOs) in Bangladesh and their potential role in creating
jobs for its youth population. The authors examined factors influencing the
job choices of youths, and looked for possible policy options that can make
NGO sector employment more attractive to the former. Based on a survey
and a stated choice experiment, the authors discuss the factors that would
make employment in this sector more attractive to prospective employees
and improve the quality of jobs for current employees, and then suggest
some policy implications. Specifically, the findings of the survey revealed
that job opportunities in the NGO sector are regarded as less attractive than
 Introduction 
   xxxiii

those in the public or private sectors, mainly due to lower wages. A key find-
ing of this research is that although the majority of highly educated young
people appear to attach importance to the level of wages when they choose
a job, they are willing to trade-off wages for non-wage benefits provided by
the NGOs, particularly for support for education and upgrading qualifica-
tions and support for health insurance. The authors argue that given many
NGOs are confronted by budget constraints, the findings of this study can
be used by the NGOs to pursue policies that promote staff welfare by effi-
ciently and effectively influencing their motivation and performance. They
also suggest that donors supporting these NGOs should insist on improve-
ments to the latter’s human resource management practices.

III. Welfare Improvements

Chapter 9. Bangladesh’s Achievements in Poverty Reduction:

The Role of Microfinance Revisited
The authors, using three waves of panel survey data collected during the
period 1991/92–2010/11, examine the role of microfinance in poverty
reduction in rural Bangladesh. The findings suggest that greater poverty
reduction can be observed for microcredit participants than for non-
participants. Also, greater poverty reduction was observed for female par-
ticipants than male participants. They show that extreme poverty decreased
by 58.9 percentage points for credit participants during the period
1991/92–2010/11, and by 55.4 percentage points for non-participants
during the same period. Using rigorous econometric framework, the
authors show that household welfare outcomes improve with microcredit
borrowing. They also show that moderate and extreme poverty decreased
by 5.1 percentage points and 8.6 percentage points, respectively, with
female participation in microcredit, whereas male participation had no
such effects on poverty.
Their results also suggest that continuous borrowers seem to have done
better than irregular borrowers over time. For example, female participa-
tion in general lowers extreme poverty by 3.6 percentage points, while
continuous participation by females lowers extreme poverty by 5.4
percentage points. Also, their analysis shows that the placement of micro-
credit programs, such as the Grameen Bank, increases household per
capita expenditures by 2.4 percent. Finally, the authors conclude that par-
ticipation in microcredit programs has been cost effective, and that it has
Another random document with
no related content on Scribd:
 Molded Polystyrene Resins.
Source: Bakelite Corporation, 247 Park Avenue, New York, N. Y.

Small quantities of Resoglas and Trolitul have been imported from

Germany in recent years. Table 9 shows the quantities imported in
recent years.
 Table 9.—Resoglas and Trolitul: United States imports for
consumption, 1933-37

Resoglas (polystyrol) Trolitul

Year
Quantity Value Unit value Quantity Value Unit value
Pounds Pounds
1933 771 (1) 672 (1)
1934 991 (1) 200 (1)
1935 110 $97 $0.88 4,608 $3,782 $0.82
1936 2,220 1,901 .86 4,671 3,641 .78
19372 None None 6,788 4,077 .60

1 Not available.

2 Preliminary.

Source: Analyses of invoices of paragraph 28, act of 1930—U. S. Tariff

Commission.

With the more advanced development of polystyrol resins in

Germany prior to 1938, evidenced by larger commercial production,
by wider application, by the marketing of a water-white product at a
considerably lower price, it might be expected that imports into the
United States would have been in considerably larger amount than
shown in table 9. That they were small was probably due to the high
rate of duty which made them expensive as compared with other
synthetic resins in the United States and thus limited their market to
uses in which the others were less satisfactory. Resoglas was
reported to have been selling for 40 cents per pound in Germany.
The imported resin is assessed for duty under the provisions of
paragraph 28 of the Tariff Act of 1930 at 45 percent ad valorem
based on American selling price (as a competitive product) and 7
cents per pound. The American selling price of the resin made in the
United States until late in 1937, as determined by the Bureau of
Customs, Treasury Department, was $1.85 per pound. The duty was
therefore 90 cents per pound. Imports of Trolitul were valued at 75
cents per pound, giving a cost of $1.75 per pound laid down, duty
paid, in domestic markets. With the present American selling price of
72 cents per pound, the duty would be approximately 36 cents per
pound.
 10. VINYL RESINS
Vinyl acetate, vinyl chloride, and to a lesser extent vinyl
chloroacetate, are the raw materials (monomers) for the several vinyl
resins commercially produced in the United States, Canada, and
Germany. These are all esters of the hypothetical vinyl alcohol and
are made by the action of acetic and hydrochloric acids on
acetylene.
The spontaneous polymerization of vinyl derivatives has been
known for many years, although its significance and industrial
application have been realized only recently. Vinyl acetate, probably
the most important of the vinyl esters, was discovered in 1912 and
first made in Canada in 1917.
Vinyl resins may be classified into (a) polyvinyl acetate, (b)
copolymers of vinyl acetate and vinyl chloride, (c) polyvinyl chloride,
and (d) polyvinyl chloroacetate.

Description and uses.

Polyvinyl acetate resins.—The several commercial types of vinyl
acetate resins are marketed under the trade names Vinyloid A, Alvar,
Gelva, Formvar, and Mowilith. The first of these is a product of
Carbide and Carbon Chemicals Co., New York, the next three are
products of Shawinigan Chemicals Limited, Shawinigan Falls,
Canada, and the last is made by the Interessen Gemeinschaft
Industrie A. G., Germany. Vinyloid A and Gelva represent the
simplest series of vinyl acetate resins and are made by polymerizing
the monomer. The softening point and viscosity of the polyvinyl
acetate resins increase with higher polymerization. Such resins are
colorless, tasteless, odorless, thermoplastic products. They are
soluble in coal-tar solvents and are compatible with certain alkyd
resins, tar-acid resins, and natural resins. Films of polyvinyl acetate
resin are not discolored by exposure, and after irradiation they
become opaque to ultraviolet light, are hard and tough, and have
good adherence and endurance. Their dielectric strength is good
and they do not show a carbon track after the passage of an electric
arc. Various grades having softening points from 80° to 200° C. are
available.
Polyvinyl acetate resins are used in making transparent papers,
paper to metal laminations, glassine papers for food packaging, as a
substitute for chicle in chewing gum, and as a component of paints,
varnishes, and lacquers. They have the desirable properties of
compatibility, durability, resistance to abrasion, and rust inhibition in
the surface-coating use. Having the same refractive index as pyrex
glass, they leave no line of demarcation when used as a cement for
that material. They have been used to stiffen toe-caps in shoes and
articles made from paper pulp suspensions. Gelvas are not molded
as such because of their tendency to cold flow. They are used,
however, as a binder for ground mineral fillers in advertising signs
and for wood flour in molded artificial wood carvings. In nitrocellulose
lacquers they improve the adhesion, luster, and toughness.
Alvars are made by replacing part or all of the acetate groups in
Gelva with acetaldehyde. Their viscosity varies with the degree of
polymerization and their properties vary according to the extent of
replacement of the acetate groups. The Alvar types do not cold flow
when molded, are tougher, harder, and have better adhesion but are
less resistant to weathering than the Gelva types. Other properties
are about the same as those of the Gelvas. Alvars having 70 to 80
percent acetate group replacement are used chiefly in spirit type
varnishes, lacquers, and enamels that must stand exposure to
weather. Another Alvar type is used in injection and press molding.
The high binding power of the resin permits the use of large
percentages of filler without loss of desirable properties. Such
moldings may be machined and polished, and take inserts, such as
the wood core in shoe heels. Flexible phonograph and transcription
records made from the Alvars have gained wide approval. An 85
percent (acetate replacement) type has better impact strength and is
used in toilet articles. Sheets, rods, and tubes of this resin may be
machined in much the same way as nitrocellulose plastic and used
where noninflammability is an asset.
Formvars are made by replacing part or all of the acetate groups
in Gelva with formaldehyde. These resins are colorless, odorless,
tasteless, and thermoplastic. They have higher softening points and
greater tensile and impact strength than the Alvars. They are
resistant to alcohols, coal-tar solvents, fats, oils, or water. Moisture
transmission rate through a film of this resin is about one-tenth that
through regenerated cellulose and one-fourth that through cellulose
acetate.
The grades of the Formvars available are designated by the extent
of replacement of the acetate group. The 75-percent replacement
type has excellent mechanical strength and flexibility and is
unaffected by sunlight. Formvars of 95 percent acetate displacement
have a tensile strength as high as 10,000 pounds per square inch
and offer possibilities in the manufacture of artificial silk and
photographic film.
The vinyl resins have made possible a new type of safety glass
superior to any heretofore marketed. By condensing butylaldehyde
with vinyl acetate, a polymer is obtained which is used as the inner
layer between two sheets of glass. Heat and pressure secure
complete adhesion and yield a sheet with greater resistance to
breakage at low temperatures than the types now in general use.
Although safety glass was invented in 1905, and many substitutes
for the original nitrocellulose inner layer have been proposed, only
two reached commercial importance before the development of the
vinyl resins. These are cellulose acetate and the acrylate resins.
Safety glass used in automobile windshields up to about 1930
discolored after a year or two of service. This discoloration was due
to the action of the actinic rays of the sun on the nitrocellulose layer.
Since 1930 this difficulty has been largely overcome by using an
actinic ray filter glass (a special glass with a high iron content) in
front of the nitrocellulose sheet, or by using cellulose acetate, which
is not discolored to the same extent by light, as a substitute for
nitrocellulose. Both cellulose nitrate and cellulose acetate, however,
have a tendency to lose toughness and strength at low
temperatures, to absorb moisture, and to separate from the glass
around the edge unless sealed, and to lose their plasticizer and
shrink.
Although a vast improvement over ordinary plate glass, laminated
glass made with cellulose nitrate or acetate has the serious defect of
being brittle at low temperatures, such as prevail in the winters of
northern States. It is easily shattered at zero Fahrenheit, while at 60°
F. and above it is quite strong. This shortcoming led to the
development of the vinyl resin sheet for safety glass with a
remarkable degree of toughness. At normal temperatures it has
rubberlike toughness which, although decreased at low
temperatures, is not punctured by the impact of a half-pound steel
ball falling from a 30-foot height at minus 10° F., whereas
nitrocellulose or acetate laminated glass withstands the impact of a
fall from not greater than one-tenth this height. A further advantage
of the vinyl sheet is that it is water resistant, making the sealing of
the edges of the glass unnecessary and thus reducing costs.
Exposure to ultraviolet light in Florida sunlight for more than 2 years
did not discolor it.
The many desirable properties of the vinyl resins, as outlined
above, indicate their widespread use in laminated safety glass when
it is available in sufficient quantities. It is estimated that our annual
output of safety glass interlayer sheets exceeds 17,000,000 pounds,
of which 25 to 30 percent are for windshields, and 70 to 75 percent
for side and back windows of automobiles.
At least one of the series of Mowiliths made in Germany is
polymerized vinyl acetate. It is recommended as an ingredient of
water-white lacquers. It is compatible with nitrocellulose and is
extremely durable and not disintegrated or discolored on exposure to
weather.
Copolymers of vinyl acetate and vinyl chloride.—The simultaneous
polymerization of mixtures of vinyl acetate and vinyl chloride yields
resins with the desirable properties of the two reactants. The extent
of plasticity is largely controlled by varying the ratio of the vinyl
derivatives. Resins high in vinyl chloride content are better suited to
molding, and those high in vinyl acetate are better lacquer
ingredients. These resins are marketed as Vinylites by the Carbide
and Carbon Chemicals Co., New York. They are thermoplastic,
odorless, tasteless, and practically nonflammable. Their outstanding
properties are resistance to water, soap, acids, alkalies, and alcohol,
and their strength and good dielectric properties. Their stability to
light is improved by the addition of ultraviolet absorbing compounds
and their stability to heat by the addition of lead oleate, calcium
stearate, or other bases. Water absorption and compatibility with
other resins is increased as the chloride content increases.
The principal types of copolymers are:
Vinylite VYN, high molecular weight. This resin is used in dentures
where good fatigue resistance, impact strength, and tensile strength
are required. It contains 85 to 88 percent vinyl chloride.
Vinylite VYN, medium molecular weight. This resin is used in
general molding and extending applications including sheets, rods,
and tubes. Its vinyl chloride content averages 85 to 88 percent.
Vinylite VYN, low molecular weight. This resin is used in moldings,
coated paper, lacquers, floor tile, phonograph records, and felt
impregnation. It contains 85 to 88 percent vinyl chloride.
Vinylite VYC. This resin of low molecular weight is compatible with
nitrocellulose and is used in lacquers and finishes for industrial
applications. Lacquers from the Vinylites are called Vinyloids.
The Vinylites for molding are thermoplastic and shrink very little,
making them applicable to large moldings. They may be used in
extension processes such as tooth-brush preforms, pipe lining, and
wall trim. Fillers and pigments may be added, although pigments
containing iron and zinc have harmful effects on the stability of the
resin. The fillers used are wood flour, mica, talc, and alpha cellulose.
Fillers reduce the mechanical strength of the resin and lessen its
resistance to water. Plasticizers, such as dibutyl phthalate or tricresyl
phosphate, give a softer, more flexible resin. Resins from the
copolymers resemble the cellulose derivatives in their molding
characteristics, mechanical strength, and appearance.
In lacquers the Vinylites offer high resistance to water, oils, and
chemicals. The drying of such lacquers is by evaporation rather than
by oxidation. They are suitable for lining food containers, coating
concrete, coating paper for bottle cap liners, and as a stiffener for
box toes of shoes. Their most successful application at present is as
an inside coating for beer cans. Floor tile containing these resins
mixed with slate flour or other filler has good possibilities.
Polyvinyl chloride resins.—Vinyl chloride may be polymerized to
give nonflammable resins of varying solubilities. The completely
polymerized resin is practically insoluble at ordinary temperatures
and is used as a rubber substitute. It is marketed as Koroseal by B.
F. Goodrich Rubber Co., Akron, O. Compared with natural rubber, it
has greater resistance to acids, alkalies, oils, and alcohol, more
flexing life, better resistance to sunlight, water, and oxidation.
Solutions of this resin marketed as Korolac are used in special types
of varnishes.
Polyvinyl chloroacetate resins.—These resins known as Mowiliths
are made in Germany. Application is largely for surface coating.
Practically no information on this type is available.
Divinyl acetylene and synthetic rubber.—Two products closely
related to those described above but probably not synthetic resins as
defined for this discussion are divinyl acetylene, a synthetic drying
oil, and Neoprene, a synthetic rubber.
Acetylene, when passed into a solution of copper chloride and
ammonium chloride, combines with itself. When two molecules of
acetylene react monovinyl acetylene is formed, and when three
molecules of acetylene react divinyl acetylene is formed. Monovinyl
acetylene reacts with hydrochloric acid to give chloroprene, which is
polymerized to synthetic rubber or Neoprene.
Divinyl acetylene is a colorless liquid which darkens on exposure
to light and which has an onionlike odor. When polymerized liquids
are formed, then as the reaction progresses viscous products and
finally insoluble, infusible, inert resins. By arresting the reaction
before the gel point is reached, an amber colored heavy liquid,
soluble in aromatic hydrocarbons, is obtained. Since divinyl
acetylene will continue to polymerize at ordinary temperatures, this
property is taken advantage of in using it as a basis for paints, under
the name “synthetic drying oil.” Clear, amber films are obtained from
solutions of this oil in solvent naphtha. Divinyl acetylene is quick
drying, is many times more impervious to moisture than linseed oil,
and is thermosetting. It is not attacked by solvents but is attacked by
strong oxidizing agents, and the gelled material may ignite
spontaneously.
Although not classified as a resin, synthetic rubber is discussed
here because of its close chemical relationship to the vinyl resins. It
is made commercially by E. I. du Pont de Nemours & Co.,
Wilmington, Del., and is marketed as Neoprene. It is sold as a plastic
polymer which is vulcanized and processed much the same as
natural rubber except that sulphur is not essential to vulcanization.
Synthetic rubber is higher in price than natural rubber, but it has
certain properties which make it suitable for service conditions where
natural rubber is unsatisfactory. Among these properties are its
resistance to gasoline, oils, and greases, and to elevated
temperatures. It does not check or crack on exposure to sunlight, nor
does it oxidize as rapidly as natural rubber. Its principal applications
are in special gaskets, printing rolls, jackets for high tension cable,
linings for gasoline or oil hose lines, balloon fabrics, diaphragms for
regulators, and packing for compressors. Its existence acts as a limit
to the increase in the price of natural rubber and assures a supply in
emergencies.

Production in the United States.

Some of the products described are commercially produced in the
United States; others in Canada or in Germany. Those made in the
United States are usually not made by more than one firm, so that
statistics of production and sales are not publishable. The vinyl
acetate resins have been produced principally in Canada; the
copolymers of vinyl chloride and vinyl acetate are domestic products.
In 1935 the United States output of all vinyl resins exceeded
1,000,000 pounds, a figure that was increased in 1936 and 1937.
The Canadian output of Gelva and Alvar has reached commercial
quantities; that of Formvar is still confined to experimental plant lots.
The acceptance of vinyl resin sheets for safety glass will greatly
increase the output in 1938. The basic patent, known as the
Morrison-Blaike patent, United States No. 2,036,092 issued on
March 31, 1936, is owned by Shawinigan Chemicals, Ltd., Montreal,
Canada, who have licensed several domestic producers. The
monomer (vinyl acetate) is now produced at Niagara Falls, N. Y., by
the Niacet Chemicals Corp., which is jointly owned by this Canadian
firm, Carbide and Carbon Chemicals Corporation, and E. I. du Pont
de Nemours & Co. It is also produced by du Pont at Belle, W. Va. It
is shipped, in tank cars, to polymerization and sheet-forming plants
at Indian Orchard, Mass., Arlington, N. J., and Charleston, W. Va.
The Indian Orchard plant, known as the Shawinigan Resin Products
Co., and jointly owned by the Canadian firm and the Fiberloid
Corporation, is now in operation. The plant of the du Pont Company
at Arlington, N. J., began production in May 1938, and that of
Carbide and Carbon Chemicals Corp, at Charleston, W. Va., is in
production. These plants have a combined annual capacity of about
10 million pounds of vinyl resin sheets. According to present plans
this new safety glass will be available for 1939 model automobiles.
The resin sheet to be used is 0.0015 inch thick as compared with the
0.0025 inch thickness of the present cellulose acetate and
nitrocellulose sheet. Several trade names have been adopted for the
vinyl resin sheets, among which are Vinylite X, and Butvar. The
licenses granted to domestic makers under the Morrison-Blaike
patent also permit them to make vinyl acetate resins for purposes
other than safety-glass sheets. Considerable progress has been
made in adapting these resins to injection molding operations for the
production of tooth-brush handles, combs, closures, and other parts.

Imports into the United States.

 The official statistics of imports of vinyl resins prior to 1936 are not
satisfactory for purposes of comparison. Imports could be entered
under either paragraph 2 or paragraph 11 and could be included
either with the statistics of imports of vinyl acetate (see table 91,
page 141) or be thrown into a general group of non-coal-tar synthetic
gums and resins, n. s. p. f., which in addition to vinyl resins would
include the acrylates and ureas. Table 10 gives imports of synthetic
resins under paragraph 11 of the Tariff Act of 1930.

Table 10.—Synthetic resins classified under paragraph 11:1 United

States imports for consumption 1931-37

Year Quantity Value Unit value

Pounds
1931 453 $173 $0.38
1932 454 29 .06
1933 1,120 496 .44
1934 4,084 1,576 .39
1935 3,105 1,804 .58
1936 146 65 .45
19372 1,963 439 .22

1 Statistical classification 838.914, synthetic gums and resins, n. s. p. f. (not coal

tar) 1931-35; 838.939 same, other than those in chief value of vinyl acetate, 1936
and 1937.
2 Preliminary.

Source: Compiled by the U. S. Tariff Commission from official statistics of the U.

S. Department of Commerce.

A better idea of the imports of vinyl resins prior to 1936 is obtained

by an invoice analysis of imports through the Port of New York under
paragraphs 2 and 11. Table 11 shows imports of vinyl acetate resins
based on such an analysis for 1934 and 1935 and on official
statistics for the years 1936 and 1937.
 Similarly table 12 shows imports of Mowilith resins based upon
import analysis for the period 1932-1935, and upon official statistics
for 1936 and 1937.

Table 11.—Vinyl acetate resins: United States imports for

consumption, 1934-37

Year Quantity Value Unit value

Pounds
19341 42,000
19351 240,000
19362 600,808 $144,782 $0.24
193723 652,730 201,213 .31

1 Invoice analysis of imports entered through the New York customs district.

2 Statistical classification 817.58 (par. 2), vinyl acetate, polymerized, and

synthetic resins made in chief value from vinyl acetate, n. s. p. f. (excluding
imports from Germany) and 838.938 (par. 11), synthetic resins made in chief value
from vinyl acetate, n. e. s.
3 Preliminary.

Source: Compiled by the U. S. Tariff Commission from official statistics of the U.

S. Department of Commerce.

Table 12.—Mowilith resins: United States imports for consumption,

1932-37

Year Quantity Value Unit value

Pounds
19321 555 $229 $0.41
19331 741 247 .33
19341 2,950 1,668 .57
19351 3,372 3,175 .94
19362 7,056 2,410 .34
 193723 220 308 1.40

1 Analysis of invoices of imports entered through the New York customs district.

2 Imports from Germany under statistical classification 817.58 (par. 2), vinyl
acetate, polymerized, and synthetic resins made in chief value of vinyl acetate.
3 Preliminary.

Source: Compiled by the U. S. Tariff Commission from official statistics of the U.

S. Department of Commerce.

Prior to January 1, 1936, the rate of duty on imports of vinyl resins

was 6 cents per pound and 30 percent ad valorem under paragraph
2, and 4 cents per pound and 30 percent ad valorem under
paragraph 11 of the Tariff Act of 1930. Under the terms of the trade
agreement with Canada, the duty under both paragraphs was
reduced to 3 cents per pound and 15 percent ad valorem. This rate
was generalized to the other countries from which we have received
imports, with the exception of Germany.

Exports from the United States.

Exports of vinyl resins are not separately shown in official
statistics.
 11. OTHER SYNTHETIC RESINS
The synthetic resins already discussed are those in substantial
commercial production but, by no means, the only ones known or
produced. Several thousand new ones have been reported and the
search continues in laboratories throughout the world. A successful
new product must be one made from inexpensive raw materials or
must possess some property or advantage that will permit its sale at
a price level above that of other resins.
No attempt is here made to list the host of less important resins.
Certain ones of unusual interest or possessing unique properties are
described below. These include resins obtained from adipic acid,
aniline, citric acid, diphenyl, furfural, lignin, sugar, and sulphonamide.

Adipic acid resins.

The resins from adipic acid are classed as alkyd resins. Those
obtained by the condensation of adipic acid and glycerin are soft and
rubbery and are used to some extent in surface coatings and in
photographic films. In these the resin is formed in three stages as in
other alkyd types: A soluble liquid, a viscous rubbery product, and a
form insoluble in the usual solvents.
Commercial domestic production of these resins was reported for
the first time in 1935 and the output has increased each year since
then.

Aniline resins.
Resins obtained by condensing aniline and formaldehyde have
been developed in recent years. Much of the research on this type of
resin was done in Switzerland by the Ciba Co., which holds a
number of patents on it. The Swiss product, called Cibanite, has
excellent electrical and mechanical properties. At least one domestic
manufacturer is licensed under the Swiss-owned patents.

Citric acid resins.

Considerable interest has recently been manifest in synthetic
resins derived from citric acid. The sharp decline in the price of citric
acid, as a result of large scale synthesis from sugar has placed it
within the realm of possibility as a raw material for synthetic resins.
The citric acid resins, classed as alkyd resins, are obtained by
condensing citric acid and glycerin. Commercial production is said to
have started in Europe, but there is no known domestic production
as yet.

Diphenyl resins.
A series of products known as Aroclors and made by chlorinating
diphenyl are available in commercial quantities.
Diphenyl was commercially produced for the first time by Swann
Research, Inc., at Anniston, Ala., about 1928. The demand for it as a
heat-transfer medium resulted in large scale output. Later it was
found that certain of the chlorinated compounds of diphenyl possess
valuable resin properties.
The Aroclors range from a clear mobile oily liquid to an amber
colored transparent solid. They are thermoplastic, do not polymerize
or oxidize, and are therefore nondrying. They may be dissolved in
varnish oils, such as tung oil and linseed oil, to give varnishes which
are resistant to alkali and water. The diphenyl resins are good
adhesives on metal and glass and give strong joints between such
surfaces. They have a high dielectric constant, resistivity, and a low
power factor. Their chief use is in wire insulation.
The domestic production of chlorinated diphenyls is, at present,
solely by the Monsanto Chemical Company, St. Louis, Mo.
Furfural resins.
Large scale commercial production of furfural, an aldehyde
obtained from oat hulls and other farm waste, has made it available
for synthetic resin manufacture.
Tar-acid furfural resins possess certain outstanding properties,
such as great dimensional accuracy, great reaction speed to the
infusible solid stage, and unusual strength and toughness. They are
available in dark shades only. Printing plates as large as those of
metropolitan daily papers are molded from them as are radio tube
bases, all sorts of electrical parts, and machined parts requiring
great dimensional accuracy. Other uses are in abrasive wheels,
varnishes, and adhesives.
Probably the largest domestic maker of furfural resins is the Durite
Plastics Division of Stokes and Smith Company, Philadelphia, Pa.

Resins from sugar.

Many attempts have been made to utilize sugar as a raw material
for synthetic resins. United States Patent No. 1,949,831, dated
March 6, 1934, claims a process for the manufacture of molding
compounds by condensing saccharide with aldehydes and urea.
Pure sucrose yields a clear, colorless, nonresilient resin, while
molasses and cane sugar give dark-colored resins. The trade name
Sakaloid is used to designate certain of these resins; there is,
however, no known domestic production. Sucrolite is the trade name
of a brand of resins from sugar produced in Europe.

Sulphonamide resins.
The sulphonamide resins were developed from para
toluenesulphonamide, a byproduct obtained in the manufacture of
saccharin (synthetic sweetening agent).
 Para toluenesulphonamide, condensed with formaldehyde or other
aldehyde, forms a viscous mass which, on heating, is converted to a
hard colorless resin. Such resins are compatible with cellulose
acetate or nitrocellulose in lacquers, the combination yielding clear,
colorless lacquers of good gloss and adhesion. Other possible uses
are as an adhesive in safety glass, in certain molding compositions,
in insulating materials, and to deluster artificial silk.
Domestic production of sulphonamide resin is entirely by the
Monsanto Chemical Co., St. Louis, Mo. It is marketed under the
trade name Santolite.
 12. ORGANIZATION OF THE
SYNTHETIC RESIN INDUSTRY
The discussion of the various synthetic resins on pages 11 to 52
carries in each case, under the heading of production, a notation of
the number of companies producing that particular resin; and the
discussion on pages 86 to 141 of important raw materials for these
resins describes briefly the conditions under which these materials
are produced. We shall now consider the interrelationships between
industries producing the several resins, and the relation of the resin
industries to their raw materials and to some of the important resin-
consuming industries.
No description of the organization of a rapidly expanding industry
can be expected to remain accurate for long. But regardless of future
changes that may be expected, the general pattern seems definite
enough to make possible a few broad generalizations. At present the
producers of synthetic resins may be classified in two groups: those
making alkyd and tar-acid resins, and those making all other
synthetic resins.
The alkyd resins and the tar-acid resins are produced in large
volume, and for these resins the patent situation is such that there is
nothing to exclude new producers. The result has been that new
firms have entered the field and there has been a marked tendency
for concerns using these resins on a large scale to produce them.
This general situation may be expected to continue as long as the
volume of consumption of these resins is rising. But when
consumption levels off, it would not be surprising if increased
competition for new business resulted in consolidations of some of
the producing units.
Each of the other synthetic resins is produced by a small number
of firms and this may be expected to continue as long as the
production of a particular resin is small, or basic patents dominate
the situation. When and if the situation in these respects changes for
some of the other resins, they will probably develop the same
tendencies as now exist in the production of the tar-acid and alkyd
resins.

Horizontal relationships between resin

producers.
Horizontal relationships between companies are those between
different units in the same industry (say two tar-acid resin
producers), or in different industries each operating at the same
stage of industrial production (say a tar-acid resin producer and a
producer of urea resin). As a rule, extensive horizontal relationships
are not common in relatively young industries, and this is true of the
production of synthetic resins. In general, it has not been necessary
to absorb competitors to achieve a greater volume of sales, and
efforts have been directed to exploiting the possibilities of expansion
in a growing market. This necessitated solving technical problems
concerning improvement of the product and its production on an ever
larger scale; legal problems regarding patents (protection of those
owned, and the policy to be adopted toward unadjudicated patents
owned by others); and the marketing problem of convincing
prospective customers of the worth of a new product. These and
other problems incidental to successful competitive production and
sale of a given type of synthetic resin have been sufficient to restrain
the desire to produce more than one type.
The patent situation of most synthetic resins is extremely
complicated. In the case of tar-acid molding resins the basic
Baekeland patents have expired, but for other synthetic resins either
the basic patent is still in force, or it is difficult to say which is the
basic patent, because of lack of adjudication by the courts. In all
cases dozens of supplementary patents are in force and sometimes
hundreds. As a result the patent situation, though one of the bars
against entering into a new field, frequently forces some relationship
between producing units in the same synthetic resin field. Cast